Telcos, banks profit from cash shortages

When Kenya initiated the mobile money revolution through M-Pesa a decade ago, few gave it a chance of success.

But then it did succeed, and phenomenally so.

Spurred on by that success, South Africa’s Vodacom launched its version of M-Pesa in 2010 but it flopped and was scrapped only two years later.

Locally, NetOne led the way with its One Wallet (now One Money) several years ago, but it was Econet’s Ecocash that really popularised the mobile money concept.

One of the key factors to the huge success of Ecocash was the country’s cash shortages.

And thanks to those shortages, the Zimbabwean economy has evolved to become arguably one of the most advanced mobile money payment economies in Africa, as good as Kenya, long thought as the poster-child of mobile money.

Mobile money, coupled with other digital platforms, also brought convenience to the transacting public as well as boosting earnings for the country’s financial services providers in the 2017 financial year.

Bill payments, airtime purchases, money transfers as well as balance enquiries using mobile phones have increased in the country, creating convenience and boosting banks’ non-interest income.

According to telecoms regulator, Postal and Telecommunications Regulatory Authority of Zimbabwe (POTRAZ), big leaps in mobile money subscriptions were recorded in 2017 as the platform provided an effective alternative to cash for making payments in the midst of the banknote shortage.

POTRAZ’s annual performance report for 2017 shows there was a 43 percent jump in mobile money subscriptions across networks.

The introduction of bank-to-wallet transfers by several banks also spurred the growth and use of mobile money in the country for effecting payment transactions.

According to the POTRAZ annual performance report, all the mobile operators experienced growth in line with the developments in the banking sector.

For the banking sector, this presents an opportunity for further investment on mobile money and other digital platforms as they capitalise on the situation.

Pan-African banking group Ecobank’s mobile application, has processed 9 million transactions, worth over $1 billion since its launch less than 18 months ago, across 33 African countries, including Zimbabwe.

Ecobank Zimbabwe’s net interest income rose 85 percent year on year, while non-interest income jumped 48 percent year on year due to significant trade finance transactions facilitated during the year.

Following the acute cash shortages experienced in the country, there has been higher customer transaction volumes on electronic channels.

The bank invested in electronic channels in line with the market trends mainly driven by cash shortages and remains upbeat about prospects for further growth and looks forward to 2018 with optimism as more customers are on-board its digital platforms.

For FBC Bank, management noted the changes in the banking space with a shift from the traditional way of banking to digital.

As such, the focus for financial year 2018 would be transforming the bank into a full digital bank with the aim of coming up with more innovative digital products.

This comes as its main revenue driver for the year to December 31, 2017 was non-funded income, a trend anticipated to continue going forward.

Of the bank’s total volume of transactions which closed the year at $54 million, 73 percent were from point of sale (POS) machines, although mobile transactions dropped to 20 percent from 57 percent year on year.

The largest banking group by deposits and assets, CBZ, reported a 32 percent increase in non-interest income to $91 million driven largely by cashless transactions. At Stanbic, non-interest income rose 10 percent to $53 million.

Despite the transitioning phase Barclays is undergoing following acquisition by FMB Malawi, the bank had a strong performance in the year with total income for the year 23 percent firmer to $71 million.

Non-interest income was 25 percent higher year on year on increased volume of transactions, resulting in a 58 percent jump in fee and commission income.

Analysts are of the view that although the total transition will take three years, Barclays will now be able to work on increasing products that serve the local market.

Management is expected to operate as a more local bank keeping up with current trends, particularly as the banking sector moves away from the traditional way of banking and adopt digital platforms while embracing mobile money.

Apart from boosting banks’ earnings, mobile money’s further growth anticipated in 2018 will likely drive the telecoms sector revenues on the back of increase in use of mobile money transactions.